RE: CALL FOR SUBMISSIONS – THE REGULATORY ...

Rhiannon Bandiera PhD Candidate School of Law Flinders University GPO Box 2100 Adelaide SA 5001 Tel: 08 8201 3706 Fax: 08 8201 3630 [email protected] http://www.flinders.edu.au/ehl/law/ CRICOS Provider No. 00114A

21 December 2016 Regulatory Practice, Education and Compliance Branch Therapeutic Goods Administration PO Box 100 Woden ACT 2606

RE: CALL FOR SUBMISSIONS – THE REGULATORY FRAMEWORK FOR ADVERTISING THERAPEUTIC GOODS Dear Sir/Madam, I wish to submit my comments in response to the Australian Therapeutic Goods Administration’s consultation document The Regulatory Framework for Advertising Therapeutic Goods. The recommendations outlined in this document are based on the findings of my PhD thesis research which will be due for submission in 2017, with the current title: “By-products of responsive governance: Regulatory compliance in the Australian pharmaceutical industry”. In this document, an overview is provided of the PhD research study and its initial findings. The research involves an analysis of the post-market enforcement activities of the TGA, in areas such as GMP, and advertising and promotion, to determine how certain regulatory strategies might affect corporate compliance with regulations. It looks to establish how compliance risks are managed within the Australian pharmaceutical market, how such strategies are received by businesses, and the overall impact of such strategies on business behaviour. This analysis is approached through the conceptual framework of “responsive regulation”, a theory which has had substantial influence on corporate law and regulatory policy in Australia. The submission provides responses to the sections: Pre-approval of Advertisements, Sanctions and Penalties, Complaints Handling, Therapeutic Goods Advertising Code Council and Industry Education. It also provides an additional response on the issue of Post-Market Reviews. I thank you for the opportunity to provide a submission to the consultation document. I am available to provide further clarification on the points raised if required. I wish you well in your deliberation. Kind regards, Rhiannon Bandiera, BBSc Hons PhD Candidate

TABLE OF CONTENTS Introduction .....................................................................................................................................1 Outline of the Study ........................................................................................................................1 Responses to the Consultation Document.......................................................................................2 Pre-Approvals .....................................................................................................................2 Sanctions & Penalties .........................................................................................................6 Complaints Handling ..........................................................................................................7 Therapeutic Goods Advertising Code .................................................................................7 Industry Education ..............................................................................................................8 Post Market-Reviews ..........................................................................................................8

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Submission: The Regulatory Framework for Advertising Therapeutic Goods Rhiannon Bandiera PhD Candidate Flinders University Law School INTRODUCTION I welcome the opportunity to provide a submission to the Australian Therapeutic Goods Administration’s consultation document The Regulatory Framework for Advertising Therapeutic Goods. The recommendations detailed in this submission are based on the findings of my PhD thesis research which will be due for submission in 2017, current provisional title: “By-products of responsive governance: Regulatory compliance in the Australian pharmaceutical industry”1. This submission offers a discipline-specific response to the review, approaching the regulation of medicines and medical devices from the field of criminology. OUTLINE OF THE STUDY My research involves an investigation into the post-market enforcement activities of the Therapeutic Goods Administration (TGA), in areas such as good manufacturing practice and advertising and promotion, to determine the extent to which certain regulatory strategies affect corporate compliance with regulations. It looks to establish how compliance risks are managed within the Australian pharmaceutical market, how such strategies are received by businesses, and the overall impact of such strategies on business behaviour. This analysis of TGA enforcement has been approached through the conceptual framework of “responsive regulation”, a theory developed by economist Ian Ayres and criminologist John Braithwaite in 1992, which has had substantial influence on corporate law and regulatory policy in Australia (Parliament of Australia 2014). The scope of this PhD is restricted to the regulation of Australian medicines industry, namely the complementary, over-the-counter and prescription medicines sectors. Due to the lack of public reporting of TGA enforcement outcomes, along with the commercial sensitivities associated with the release of such information, this PhD has utilised a qualitative research approach to evaluate the extent of TGA post-market regulatory enforcement. Data for this project was obtained from two sources: from consultation submissions to TGA, Government, and Parliamentary Reviews which aimed to reform the post-market regulation of medicines; and from semi-structured interviews with individuals connected to the regulatory process. 12 consultations listed on the TGA, Department of Health, and Parliament of Australia websites between the 27th of August 2010 (the end date for submissions to the consultation Improving Advertising Arrangements for Therapeutic Goods) and 30th of June, 2014 were selected as part of this analysis2. Interview participants comprised of current and former TGA staff, representatives from 1 2

For this reason, please do not cite without permission. All consultations listed on these websites during this period were considered to reflect the current responses and attitudes towards the regulatory regime.

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industry associations, academics, consumer groups, and legal aids. A thematic analysis of interview transcripts and public consultation submissions was used to identify, report and analyse commonly occurring patterns (themes) from the data with respect to individual and organisational perceptions towards the TGA and its responsiveness to corporate non-compliance.

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RESPONSES TO THE CONSULTAION DOCUMENT PRE-APPROVAL OF ADVERTISEMENTS: Removing the pre-approval process in exchange for an informal pre-approval process administered at the discretion of industry associations and/or commercial providers will only create greater uncertainty and inconsistency in therapeutic goods advertising.

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Having industry associations and/or commercial providers advise sponsors on how well an advertisement conforms with regulatory requirements will not provide sponsors with the level of assurance they are ultimately seeking from such processes – that a given advertisement is compliant and will not be subject to an advertising complaint after it has been evaluated. This level of assurance can only be obtained through the explicit approval of an advertisement for use.

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Informal and voluntary pre-approval processes will have less merit in the eyes of sponsors because the time and financial costs associated with obtaining informal pre-approval exceeds the potential benefits (i.e. the degree of assurance the sponsor receives that an advertisement will not be subject to a complaint). This will most likely discourage sponsors from applying for advertising pre-approval and render informal pre-approval processes redundant.

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De-formalising the pre-approval process could raise potential issues around liability. For example, if a sponsor received informal advice that an advertisement complies with regulatory requirements only to have it deemed non-compliant during the complaints process, can a sponsor be liable when they have acted upon this advice in good faith? Could industry associations and/or commercial providers potentially expose themselves to liability (and action from sponsors) for providing ill-advice given they are not being granted the official and formal capacity to pre-approve advertisements in the first instance? These issues must be taken into consideration as it will not only affect the application of the penalties proposed in the Consultation Document, but also the voluntary uptake of informal pre-approval processes by industry associations and/or commercial providers.

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As the option of a pre-approval process will be “left open” to industry associations and/or commercial providers, it could create further inconsistency within the therapeutic goods advertising regime if some (and not all) industry associations and/or commercial providers chose to adopt a pre-approval framework. The ad hoc implementation of informal preapproval processes could perpetuate differences in the levels of advice provided to sponsors as well as the types of decisions handed down by authorising bodies3.

Similar concerns have been raised about the current pre-approval process because only some (and not all) advertisements have to be pre-approved (see submissions to Improving Advertising Arrangements for Therapeutic Goods and Regulatory Impact Statement: Regulating the Advertising of Therapeutic Goods to the Public). It is difficult to see how the removal of the current pre-approval process in favour of a decentralised pre-approval process implemented at the discretion of industry associations and/or commercial providers will provide greater consistency in advertising pre-approval than the current framework.

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The delegation of responsibility to industry associations also ignores one of the fundamental problems associated with the current advertising regime: that sponsors are not compelled to become members of industry associations and can choose not to subscribe to an industry Code of Conduct. If some or all industry associations wish to retain the advertising pre-approval process (e.g. by way of compelling association members to undertake advertising pre-approval as a condition of membership), non-members will continue to escape requirements, perpetuating difference within the advertising regime 4.

There is considerable merit in retaining a pre-approval process on a cost basis. •

It is more cost effective for sponsors to undergo advertising pre-approval (a maximum of $1,115 per advertisement and $205 for every additional hour of processing), then to forgo approval, pay a fine (up to $9,000,000 per offence under the proposed changes) and the additional costs associated with rectifying a non-compliant advertisement.

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The current system which delegates advertising pre-approval to ASMI and CMA has been cost-effective for the TGA since the TGA (and by extension, the Commonwealth Government) has not had to expend the resources to pre-approve advertisements.

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As the costs for pre-approving an advertisement are directly recovered from fees, the preapproval process remains highly cost-effective for the approving bodies (ASMI and CMA).

Some sponsors5 and industry associations6 have consistently advocated for a pre-approval process, arguing that it ‘should be applied [to] all forms of advertising direct to consumers’7. For example, ASMI claims that: [t]here is value in pre-approvals for advertisers (large and small) as it provides a measure of reassurance and also some control over inexperienced advertisers. The ability of the preapprovals process to prevent consumers being exposed to inappropriate messages should not be under-estimated. The pre-approvals process has served all stakeholders well since its inception … and no reasonable justification has been put forward to abandon the system8.

ASMI has further argued that:

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Again, the issue of non-members has been raised by numerous stakeholders over the past decade in multiple consultations (see submissions to Improving Advertising Arrangements for Therapeutic Goods and Regulatory Impact Statement: Regulating the Advertising of Therapeutic Goods to the Public) and has yet to be acted upon by the Commonwealth Government. Even with the availability of opt-in mechanisms (e.g. GMiA allows non-members to voluntarily sign up to the GMiA code of conduct without having to join the association), companies are yet to take up these options. See submission by Ken Harvey to the Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013. 5 For example, see the submission of Swisse to the consultation Regulatory Impact Statement: Regulating the Advertising of Therapeutic Goods to the Public. 6 See the submission from the Australian Self-Medication Industry to the consultation Regulatory Impact Statement: Regulating the Advertising of Therapeutic Goods to the Public. 7 Ibid. 8 Ibid.

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the current demarcation between the advertising which requires pre-approval, and the advertising which does not, is arbitrary and reflects a practical decision regarding resources rather than a decision based on protecting consumers … pre-approval provides valuable and objective insights to advertisers, protects consumers and is more effective at preventing inappropriate communication than increasing penalties9.

The principle reasons for the abolishment of the pre-approval process were the complexity of the current arrangements, the delays it caused and the lack of assurance it provided for sponsors (i.e. that an advertisement will not be subject to a complaint). However, counter-arguments can be provided for each of these claims. Firstly, the complexity of current arrangements could easily be overcome through the harmonisation of the pre-approval process. The pre-approval process could be centralised so that advertising pre-approval is carried out by a single body, removing any perceived inconsistencies associated with the two current pre-approval bodies. The pre-approval process could also be extended to cover all products and all forms of advertising directed to consumers, reducing inconsistencies in the standard and quality of advertisements for different products appearing in different mediums10. This is a realistic proposal given that the ASMI already provides pre-approval services in both specified and other media for all ASMI members 11. Secondly, the timeliness of the current pre-approval process appears to be consistent with other international bodies. In the 2014-2015 period, it is claimed that the average turnaround for advertising pre-approval by the ASMI and CMA was seven working days12. It should also be noted that the Expert Review has largely based its recommendation on the ‘standard legislated timeframe’ of 10 to 60 days and not the actual rate of pre-approval13. If the actual rate of preapproval is consistent with other similar authorities, the argument that current processes are untimely is untenable. Finally, it appears that as few as 0.05% of the advertisements pre-approved by ASMI and CMA are subject to advertising complaints14. If these figures are accurate, the current pre-approval process would provide much greater assurance that an advertisement would not be subject to a successful complaint than one that has not been pre-approved. Based on the range arguments presented, it is recommended that the pre-approval process be retained. Advertising pre-approval provides greater protection for consumers, greater assurance for sponsors (at a lower cost compared to more retrospective measures), and is largely resource9

See the submission from the Australian Self-Medication Industry to the consultation Improving Advertising Arrangements for Therapeutic Goods. 10 It would also lessen the burden on the complaints process because a higher proportion of advertisements are being pre-screened prior to publication. 11 Not only does ASMI provide formal pre-approval for all advertisements published in specified media – which includes broadcast media (e.g. television and radio), print media (e.g. newspapers and magazines), outdoor advertisements (e.g. on billboards, bus shelters, taxi displays, and the sides and interiors of buses), and cinema advertisements – but it also provides informal reviews of advertisements appearing in other media – such as leaflets, flyers, brochures, catalogues, letterbox drops etc. – which is directed at consumers or health care professionals. Informal reviews are mandatory for all ASMI members and the costs are inbuilt into ASMI fees. Further information can be found at . 12 O’Reilly, B 2016, ‘Advertising reform: Watering down consumer protection’, MJA InSight, 38(3), . 13 Review of Medicines and Medical Devices Regulation 2015, p. 59. 14 O’Reilly, 2016.

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neutral because the costs are directly recovered from fees. With that said, however, the preapproval process could be improved with greater harmonisation (i.e. the centralisation of the preapproval process and the extension of pre-approvals to cover all forms of advertising directed to consumers). This proposal would be highly achievable under a cost-recovery model. SANCTIONS AND PENALTIES: While the enhanced penalties proposed for breaches of the DTCA regime are welcomed, they will have little to no impact on compliance if the certainty and celerity of sanction is low. Under the current regulatory regime, corporate non-compliance ‘takes place in the face of low certainty of punishment and even lower severity and swiftness’15. The Commonwealth Government has indicated that it plans to increase the number of products subject to a random/targeted post-market review (Recommendation 49 of the Expert Review), but little to no information has been provided as to how much these activities will be increased (let alone resourced). In addition, two of the Models proposed for the new complaints body (Models 2 and 3) do little to increase the swiftness of the complaints process because multiple bodies remain involved in complaints handling processes (see Complaints Handling). Sponsors need to know that their probability of being caught is high and that punishments will be swift, as enhanced sanctions alone will not be enough to compel compliance. Proponents of deterrence have argued that more certain punishments have a greater deterrent effect than less certain punishments because of the increased risk detection 16. In fact, research has shown that it is often sanction certainty (and not severity) that has the greatest deterrent impact17. Furthermore, when a sanction is swiftly applied, it creates greater association between the act of non-compliance and its costs, creating a greater reinforcing effect18. A conscious effort therefore needs to be made to increase the rate of detection (i.e. through greater post-market surveillance) and the timeliness of the remediation of false and misleading claims (i.e. by centralising the complaints process), so that fewer financial benefits can be derived from noncompliant advertising. Although injunctions are now being offered under the new regime (which will impede a sponsor’s ability to profit from advertising undergoing a complaint), sponsors remain able to sell off all residual stock found to contain non-compliant advertising claims. Sponsors are unlikely to be discouraged from producing non-compliant advertising claims – especially in those circumstances where claims are false and misleading or are prohibited/restricted – because they continue to profit from illicit advertising by selling all remaining stock. It is therefore recommended that the new complaints body be empowered to either: a) request all remaining stock containing the noncompliant advertising be returned to and rectified by sponsors in all severe cases; and b) request that retraction notices be issued at the point of sale (irrespective of whether the product in purchased online or instore) in less severe cases. As either scenario will come at an added cost to Paternoster, R 2016, ‘Deterring corporate crime: Evidence and outlook’, Criminology & Public Policy, 15(2), p. 385. 16 Beccaria, C 1963, On crimes and punishments, trans. H Paolucci, Bobbs-Merrill: Indianapolis. 17 Paternoster, R 1989, ‘Decisions to participate in and desist from four types of common delinquency: Deterrence and the rational choice perspective’, Law and Society Review, 23(1), pp. 7-40. 18 Beccaria, 1963. 15

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sponsors, this will provide complaints determinations with much greater organisational contingency and reputational impact19. In its current capacity, product suspension and cancellation also has little deterrent impact on listed medicines sponsors because of the ease and low cost of listing a product on the ARTG. Product suspension and cancellation should therefore not be treated as a punitive form of sanction or form the primary response to the failure to comply with a Regulation 9 Order. Any blatant failure by a sponsor to comply with a Regulation 9 Order should automatically attract a financial penalty. COMPLAINTS HANDLING: As the timeliness of the complaints process has been consistently raised in previous consultations (and impacts upon the celerity of punishment), the preferred option would be to adopt Model 1 (Commonwealth Agency). This is because the TGA already has the necessary expertise, resources and facilities to appropriately evaluate claims of efficacy which make up 75% of all advertising complaints20. It places the TGA in a better position to pro-actively monitor compliance (e.g. to evaluate claims of efficacy, advertisements not subject to complaints and to create compliance histories), and removes unnecessary duplication (e.g. by having multiple bodies conferred with identical powers and evaluating the same types of material). It also eliminates the need to refer complaints – a major source of delay in the past. Some stakeholders have claimed that sponsors have intentionally exploited these delays to increase the immediacy of rewards (profits) and delay the imminence of costs (CRP determination and TGA administrative penalties)21. Should this option be unacceptable, the second preferred option would be Model 2 (Independent non-Government Authority conferred with statutory powers). Although this option provides the same degree of timeliness offered under Model 1, it is highly duplicative. This body would need to be conferred with the same statutory powers as the TGA, must replicate the same level of expertise and regulatory experience as the TGA, and would essentially evaluate the same types of material the TGA would be required to evaluate as part of a post-market review. Model 2 could also generate inconsistencies in decision making because both the TGA and Independent nonGovernment Authority will be arbitrating on claims of efficacy. THERAPEUTIC GOODS ADVERTISING CODE: All the proposed changes to the Therapeutic Goods Advertising Code are welcome, especially the intended expansion of “prohibited” and “restricted” representations. The suggestion that advertising be aligned with information contained in the ARTG is welcomed as this would mean that advertisement claims would have to simulate the permitted coded indications sponsors select 19

Cullen, FT, Maakestad, WJ & Cavender, G 1987, Corporate crime under attack, Anderson: Cincinnati. In 2012-13, approximately 75.2% of advertisements breached those sections of the Code associated with claims of efficacy (i.e. s. 4(1)(b), 4(2)(a) and 4(2)(c), see p. 11 of the TGACC Annual Report 2013-2012). 21 See submission by The Royal Australian College of Practitioners to the consultation Regulatory Impact Statement: Regulating the Advertising of Therapeutic Goods to the Public. 20

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at the time of application or the indications which sponsors have had pre-approved by the TGA. This move will would bring greater clarity to advertising rules and will go some way towards limiting misleading claims. However, as the Code will still remain susceptible to abuse (e.g. sponsors can make claims which are inconsistent with the permitted indications they use at listing), pre-approval of advertising is necessary to ensure that consumers are not exposed to false and misleading claims. Given that the Therapeutic Goods Advertising Code Council will no longer be able to suggest revisions to the Code, it is recommended that the new complaints body be empowered to make such changes. Previous consultations by the TGA have highlighted that because complaints processes are captured in regulation (as opposed to law), they are less likely to be flexible and adaptive to change (and therefore more likely to delay the certainty of punishment)22. Ideally, the Code should be allowed to be managed at an operational level so that it can be more responsive to changes in therapeutic good advertising (e.g. the introduction of new mediums, product developments etc.). INDUSTRY EDUCATION: Advertising breaches have continued to occur even with the availability of industry education over the past several years23. This indicates that industry education alone is not enough to compel compliance with advertising requirements. While the addition of further educational tools may assist sponsors by clarifying the new advertising arrangements, the TGA should invest greater time into those mechanisms which are more likely to deter non-compliance. POST-MARKET REVIEW: As indicated previously, little to no information has been provided by the Commonwealth Government as to how post-market monitoring will be increased and resourced. These details are essential to determining the feasibility of a complete shift in regulatory focus to post-marketing processes. Removing the requirement for advertising pre-approval and relying upon post-market mechanisms (e.g. complaints processes and post-market reviews) to identify non-compliant advertising will lead to an increased workload for the new complaints body. This is simply because fewer advertisements will be pre-screened prior to publication and there will be a greater reliance on post-market mechanisms (complaints lodgement and post-market reviews) to identify noncompliant advertising. The CRP’s incapacity to resolve and remediate non-compliant advertising in a timely manner due to the volume of complaints has been a principle motive for its

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See the submission from the Complaints Resolution Panel to the consultation Improving Advertising Arrangements for Therapeutic Goods. 23 O’Reilly, 2016.

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abolishment24. Unless the new complaints body receives resourcing beyond what is currently provided to the CRP – something which has not been discussed in detail in the current consultation document – it is unlikely that it will have the capacity to deal with the current level of complaints, let alone a potential increase in complaints resulting from the shift in regulatory oversight to postmarketing processes. A reliance on post-marketing mechanisms to identify non-compliant advertising will inevitably expose consumers to direct, indirect and financial forms of harm irrespective of the amount of post-market reviews that are conducted by the TGA. It is a highly reactive and complaints-driven enforcement strategy which largely benefits sponsors by creating fewer barriers to publishing an advertisement.

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A substantial proportion of these complaints are due to the failure of advertisers to substantiate claims of efficacy made in advertisements. These claims are not evaluated prior to marketing and the TGA is reliant on complaints and post-market reviews to identify misleading efficacy claims. Although this is expected to change with the implementation of Recommendation 39 of the Expert Review, allowing the TGA to evaluate efficacy for all sponsors undertaking the Option Two pathway, sponsors can continue to avoid pre-market assessment by undertaking the Option One pathway (self-assessment). As there will be few incentives to compel sponsors to undertake the Option Two pathway (e.g. sponsors who choose the Option One pathway will not be required to issue a disclaimer that their product has not be evaluated for efficacy and will forgo the additional time and financial costs associated with the evaluation of efficacy under the Option Two pathway), efficacy-based advertising complaints will likely continue under the new regime.

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